Opinion: Taking part in Round The Bays is an annual ritual for many. For some it is a race; for others a stroll. For some it’s a group event; for others an individual one. Lots of corporate and community-building motivations. On Sunday I jogged and walked with staff and students in my bright orange AUT T-shirt espousing our marketing slogans, along with many corporate, health, social and exercise organisations all similarly patched up.
At my pace I had plenty of time to consider the messages (on backs as they passed and before they disappeared from my fading eyesight). Many were commercial, many with wordplays on energy. Fair enough, there was a lot of CO2 being expelled, though less than when Tamaki Drive is full of cars. Every commercial energy slogan was clean and healthy. But I’m cynical about that.
We look at the same thing from different perspectives and see entirely different things.
I had been reminded of that this past week reading a financial organisation’s analysis of our electricity markets.
The punter in the street might well be of the view that electricity prices are high and that good news would be anything that suggested the chance to reduce those costs. A business using significant amounts of electricity might well hold a similar view, and we have seen a number of such businesses closing in response to ongoing high prices.
Someone concerned with not only prices but also the social costs of gas and coal being used as fuel for electricity supply with the known environmental effects might well want to see additional solar and wind supply delivered to the market.
It is unfortunate that our electricity market and successive governments that have set the regulatory tone for those markets have been slow to recognise the increasing demand for electricity and the dramatic shifts in costs in favour of renewable generation, storage and distribution.
There is now a considerable pipeline, if that’s not an anachronistic description, of renewable generation projects, both from established generators and new entrants to the market. From the electricity user points of view I have described you might think this was a good thing, in a better-late-than-never sense. New, cheaper, environmentally sustainable electricity, ka rawe!
But think about it from the poor old investor perspective, and trust me they do think hard about it. As the analysis I was reading warned, there was such a lot of potential generation from such sources that there was a major threat of “meaningful overbuild”. Too much cheaper electricity. Oh no!
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But wait! “It is not too late for companies to manage their build programmes to avoid a material collapse in wholesale prices.” Phew! The analysis then goes on to show that (fortunately from the investor point of view) the next couple of years are looking okay in avoiding “oversupply” and that the generators can defer some of their building plans for generation and storage to mitigate the risk of wholesale prices falling.
You can see the clash. Some people (okay, most people) selfishly want electricity prices to fall so they can afford to live and work. But others (okay, a few) want to avoid that outcome to make more money.
Guess who wins?
Of course, you might think that government (yes, I know – the ones who have been slow to push ahead with renewable generation in the past) would in the public interest be stepping up to ensure that the majority is favoured over the few. Don’t bet on it. After all that same government owns and derives significant (dividend) income from its ownership of a large part of the generation companies. And it has shown limited appetite for reducing that income or harming the interests of the private investors they are partnered with. Put simply, the government has the power to create “oversupply” and lower prices with renewable generation but chooses not to.
The other interesting aspect is that the financial analysis suggests that competition is not sufficiently strong to avoid the pricing outcome the generator investors fear. Far be it from me to suggest that anyone might collude to avoid that outcome (you know, the one most of us want). After all individual business self-interest might be sufficient. Or new generators of size might be strong enough to drive down prices below what the incumbent gentailers might want. We should all hope that they do, aided by smaller scale and domestic adoption of solar generation and distribution options.
But it would all happen a lot more effectively, efficiently and quickly if government exercised its ownership power in the sector and forced the issue. The technology, the pricing, the locations and plans are all there. All that is absent is the will.
But by now the finish line loomed. I am claiming, as one may in these Trumpian times, to be the over-75 champion. It’s no more post-truth than the idea that energy companies are working for us.